Recently I did some work for a client who asked “tell me about the market for bill payment services in the United States?” I was in this business for a number of years as an executive for the market’s largest provider of such services but had not looked at the market at a broad level since 2008. I thought it was interesting to see how things have unfolded and thought I would share with everyone.

First of all, even though electronic bill payment is relatively mature I talk to a lot of people who are quite knowledgeable about financial services, payments and technology who don’t really understand the bill payment ecosystem nor the differences between the two main models. Below is the fastest growing model and soon to be the largest in terms of adoption and usage, referred to as Consolidated Bill Payment. Named such because it is a service that consolidates a customers’ bills and payments at a single point – most often through their bank.

(click to enlarge)

The second model which is popular and growing quickly but not as fast is known as Biller Direct – it is projected to be surpassed by Consolidated in terms of usage volume in the next few years. Biller Direct as the name implies is where a consumer pays their bill directly to their biller (for example, logging into your cable provider’s website and paying your monthly bill).

Biller Direct Ecosystem (click to enlarge)

I’ve also included here a snapshot of the size of this market overall. It has grown well since 2009 and projected to continue at overall a double digit pace for key electronic methods – ACH debit at 12% (for example, when you have your mortgage automatically deducted each month from you checking account), Online Biller Direct at 13% and Consolidated at 18.5%.

Bill Pay Market Size Projected (click to enlarge)

Behind these number though is a natural slowing of this growth rate. The rates quoted just before are the compounded average rate over 5 years from 2009 to 2014 but the rate of growth from any year to the next year is decelerating. It is one of the key challenges to providers in this market – how to deal with a rapidly decelerating growth rate without resorting to price and volume as your only competitive weapons for revenue growth. As evidence, the anticipated revenue growth rate for providers selling the Consolidated model is just 8% per year from 2009 to 2014 (and as with volume growth rates, is decelerating toward zero as 2014 approaches and we get beyond it).